Rebecca Cave tuned in to the HMRC webinar for tax agents on MTD for business to see if the questions tax agents have been raising were answered.
Focus on VAT
The webinar started by dispelling the myth that MTD for VAT would be postponed. Mel Stride, the Finance Secretary to the Treasury, who has responsibility for HMRC, is determined that there will be no further slippage in the MTD for business timetable.
This webinar focused on MTD for VAT, and we were promised future webinars dealing with MTD for other taxes in due course.
Who is in and when?
VAT-registered traders with annual VATable turnover in excess of £85,000 (the VAT registration threshold) will be required to enter into the MTD regime from the first VAT period (not accounting period) that begins on or after 1 April 2019.
The professional accountancy bodies are still pushing for the commencement date for each business to be the start of their accounting year which falls on or after 1 April 2019. Using the VAT return period as the trigger to enter MTD will mean many businesses will have to switch to MTD reporting, and possibly to new MTD-compliant software, part way through an accounting period. This is not ideal. No business wants to change accounting software part way through the accounting period.
The turnover which is counted as part of the £85,000 threshold for MTD is only those sales which are subject to VAT, but including zero rated sales. Where the business makes sales which are exempt from VAT or outside the scope of VAT, that exempt or outside the scope turnover is not counted towards the threshold for determining whether the MTD is mandatory for that business.
A business whose VATable turnover is currently under £85,000 will have to come into MTD for the start of the next VAT period after its turnover has exceeded £85,000. It will also have to register for VAT if it is not already registered. The threshold of £85,000 therefore needs to be checked every month on a rolling basis, even for businesses which have registered for VAT on a voluntary basis.
HMRC will encourage VAT-registered businesses that have registered voluntarily to join the MTD regime before they are required to do so. But if the turnover of a business falls below £85,000, it must stay within the MTD regime until it deregisters from VAT.
Who is exempt?
Businesses will be exempt from the MTD regime if they are:
- subject to insolvency procedures;
- entirely run by practising members of a religious society whose beliefs prevent them from using computers; or
- it is not reasonable/practical.
The HMRC speaker was at pains to point out that the third category of exemption may include problems with accessing the internet or computer equipment due to age, disability, or the remoteness of the business location, but other factors could be relevant. Any business already exempt from online filing of VAT returns will automatically be exempt from the MTD regime.
A business which wants to claim exemption will need to contact the VAT helpline to discuss their circumstances, or their tax agent can do this for them. HMRC will provide what they call assisted digital service, which may be a light-touch approach or more intensive. HMRC believes that only a small number of businesses will be referred to an enhanced support service that will give intensive support over the phone or possibly face-to-face.
Support for businesses
Part-way through the webinar HMRC held a poll to ask whether clients knew about MTD for business: 75% said most clients knew little about MTD and will rely on their tax agent. The number of businesses that will find it difficult to use MTD-compliant accounting software may be much larger than HMRC envisages.
HMRC says it will provide general support to businesses for MTD in the following ways:
- MTD guidance on gov.uk
- MTD guidance in accounting software
- Phone helplines and webchat
- On social media such as Twitter
- Online learning such as webinars and videos
Where a business really cannot cope with its MTD obligations, a non-digital means of submitting the VAT return will be provided. Although it was not mentioned in the webinar, AccountingWEB understands that the current online form for submitting the VAT return will be retained for VAT-registered businesses who are not mandated into the MTD regime.
The live testing of MTD-compliant software will start in April 2018. HMRC will invite businesses to join the pilot, drawing from the list of those that have applied. The simplest businesses will be asked to join first, more complex businesses will be invited to join as the pilot program goes. Agents will also be invited to take part in the pilot, subscribe clients into MTD, and submit VAT returns on their behalf.
The HMRC speaker did not define what she meant by simplest businesses and more complex businesses. However, she said that in due course the pilot programme would be opened to all VAT-registered businesses, and at that stage businesses will join through a portal on gov.uk, not by invitation.
It should be noted that the majority of businesses that take part in the pilot programme won’t complete a full year of VAT returns submitted under MTD before the MTD regime becomes compulsory in April 2019.
HMRC will not provide free software to allow businesses to comply with their MTD obligations. All businesses will be expected to use commercial software or to develop their own in-house bespoke software to comply with MTD.
HMRC is working with large number commercial software providers in a test environment, and the majority expect to have software ready for the MTD pilot programme. Businesses that use bespoke software need to register with HMRC as a software developer to gain access to the APIs to write into their own bespoke software.
This webinar will be run again on 6 March 2018 at 12.30pm and 2.30pm. Questions can be submitted in advance to [email protected], include "MTD for business" in the subject line of your email, or post your questions below and we will forward them to the MTD team at HMRC.
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.